Low global car inventories and cost cuts should boost Stellantis profit margins this year, but a shortage of semiconductors and investments in electric vehicles could weigh on results, the newly-formed car maker said.
The forecast came as Stellantis, created by the January merger of Peugeot-maker PSA and Fiat Chrysler (FCA), reported better-than-expected results for 2020.
"Stellantis gets off to a flying start and is fully focused on achieving the full promised synergies (from the merger)," Chief Executive Carlos Tavares said in a statement.
Stellantis is the world's fourth largest carmaker, with 14 brands including Fiat, Peugeot, Opel, Jeep, Ram and Maserati.
It said 2021 results should be helped by three new high-margin Jeep vehicles in North America and a strong pricing environment there.
The US market has driven profits for years at FCA and starts off as the strongest part of Stellantis.
The group's guidance assumes no more significant lockdowns caused by the global Covid-19 pandemic, which shuttered auto plants around the world last spring.
Stellantis should also get a lift as its starts to implement a plan aimed at delivering over €5 billion a year in savings, without closing any plants. Tavares has also pledged not to cut jobs.
But a pandemic-related global shortage of semiconductors, used for everything from maximising engine fuel economy to driver-assistance features, could hurt business.
Auto industry executives have said the shortage should ease by the second half of 2021.
Stellantis said its "electrification offensive" could also weigh on results this year.
Car makers are racing to develop electric vehicles to meet tighter CO2 emissions targets in Europe and this week Volvo joined a growing number of carmakers aiming for a fully-electric line-up by 2030.
Stellantis plans to have fully-electric or hybrid versions of all of its vehicles available in Europe by 2025.
This is broadly in line with plans at top rivals such as Volkswagen and Renault-Nissan, although Stellantis has further to go to meet that goal.
The carmaker is targeting an adjusted operating profit margin of 5.5%-7.5% this year.
That compares with a 5.3% aggregated margin last year - 4.3% at FCA and 7.1% at PSA excluding a controlling stake in parts maker Faurecia, which is set to be spun-off from Stellantis shortly.
Tavares achieved an improvement in margins at PSA by cutting costs, simplifying its vehicle line-up and delivering synergies on its purchase of Opel/Vauxhall, a model investors hope he can replicate at Stellantis.
The company said that combined adjusted earnings before interest and tax (EBIT) amounted to €7.1 billion last year.
At the end of 2020, combined liquidity stood at €57.4 billion and free cash flow at €3.3 billion.
Stellantis is proposing to distribute a €1 billion dividend to its shareholders.